Buenos Aires, Argentina — After Ivana Roa lost her job a few years ago as a manager at an energy company, she went back to school to study law and economics with the aim of building a new career and income. But those hopes are dwindling fast as a deepening economic crisis is breaking thirty-year inflation records and pummeling the value of the Argentine peso.
Roa, 29, tutors math to cover her bills but has barely enough left over to buy herself a calculator for class. Earlier this month, she joined thousands of people who marched to Buenos Aires’s central square to protest their depleting incomes and demand more financial help.
“I can assure you that every one of these people here are not only living through a very rough time, but they just don’t have enough,” said Roa.
“The situation for young people is basically to leave,” she said. “Imagine how sad that is — that in a country with good public education, and a free health care system, you have to consider leaving because you feel you don’t have a future.”
With inflation running at 64 percent in the past twelve months and consulting firms forecasting it could hit 90 percent by the end of the year, the prognosis is grim in the third most populous country in South America.
It is difficult to know what something is worth in Argentina now, with prices in grocery stores changing every week. Vendors of construction materials warn buyers that they may not be able to honour a quote for more than a few days, as some manufacturers were forced to halt production altogether. Import restrictions intended to protect the government’s dwindling foreign currency reserves are stoking fears of future shortages. And people are watching in horror as the street value of the US dollar goes up in relation to their fragile currency, regardless of whether they can afford to save in the greenback, because it has become a shorthand for the health of the economy.
Argentina staved off default on a $44bn loan from the International Monetary Fund (IMF) earlier this year, but the legitimacy of the new deal — and the spending cutbacks it entails — continues to be questioned by swaths of society that cannot make ends meet. An earlier default on a payment in 2020 means that it has limited access to international credit. The resignation of Martin Guzman, the economy minister who had shepherded that deal, signalled a new low in the fractious unity of the ruling Peronist coalition.
“We are in a very critical time,” said Silvia Saravia, a leader with Barrios de Pie/Libres del Sur, one of the main social organisations that run soup kitchens in the low-income neighbourhoods in and around the capital city.
“We don’t know how high prices are going to go,” Saravia told Al Jazeera. “And because the earnings are so unstable, with more than 50 percent of people in the informal economy, someone who has an odd job, if it rains, they can’t work, and so they don’t make any money. This generates a lot of anguish and drains you.”
At a press conference earlier this month, the newly minted economy minister Silvina Batakis sought to transmit calm and pledged that Argentina will meet the obligations of the IMF deal.
“I am someone who believes in fiscal balance and the solvency of the state as an engine of economic activity,” she said. “We are not going to spend more than we have.”
She announced a series of measures intended to stabilise the economic picture, including a move towards hiking interest rates – a standard policy tool to rein in inflation – a state hiring freeze and stricter control of prices set by the major companies.
“Everything that happened last week was an abuse in prices, they are just speculations, there is no technical explanation,” she stressed, referring to a sudden jump in prices. In some cases, the abrupt increase had reached 20 percent overnight to match the 17 percent depreciation of the parallel peso in less than one week following Guzman’s resignation.
Damian Di Pace, an Argentinian economist at the helm of consulting firm Focus Marketing, does not see a way for the government to put the brakes on inflation in the short term. Argentina is a country used to inflation in the double digits, but the pandemic dealt it another blow along with the war in Ukraine. And while countries around the world had to print currency during the global shutdown, in Argentina the pace has continued, he said.
“The big challenge for the economy minister is to ensure that Argentina does not reach triple-digit inflation by the end of the year,” he told Al Jazeera. “Argentina needs to avoid a further spiral.”
“It has to lower the fiscal deficit, emit much less currency, and partially increase the interest rates to incentivise savings in pesos,” he said. “The Argentine doesn’t want to hold on to their own currency. In any moment of crisis, they try to shed pesos. They use it to buy food, or they buy US dollars.”
‘Under the line of poverty’
Karina, 43, sees that tendency first hand from the streets of Buenos Aires’s Microcentro, where people like herself work on behalf of underground exchange houses, trying to entice prospective buyers or sellers of foreign currency. Argentina has several exchange rates. The parallel exchange rate — known locally as the dollar blue — on Monday was selling at about 322 pesos per US dollar, more than double the official exchange rate controlled by the government. And while it represents a small fraction of the exchange market, its value is the one most people look to. On July 21, the government added a new exchange rate specifically for tourists and intended to convince them to exchange their currency with banks so that their dollars flow into the formal market, not the parallel one.
“People are going crazy trying to buy dollars. On the one hand I get it, because it’s a way to safeguard your savings, but I also know that it’s not good for the economy,” Karina, who declined to give her last name, told Al Jazeera. “If the [price of the] dollar goes up, so does everything else. It’s more expensive to buy food, clothes, electronics.”
Roberto Bereche said he tracks the rise and fall of the dollar exchange rate as a “hobby” — he cannot possibly afford to buy the currency now. The 74-year-old Peruvian sells avocados, oranges and bananas on a main avenue of the Buenos Aires neighbourhood of Chacarita.
Of his nearly 20 years living in Argentina, “this one is the hardest,” said Bereche, who sees the effect of inflation reflected in his sales. He used to sell two 20kg (44lb) boxes of avocados a day. Now it is half that. Bereche says if it were not for a small 7,000 peso ($54 at the official rate or $21 at Monday’s parallel rate) subsidy from the government, he would not be able to afford the room he rents at 8,000 pesos ($62 at the official rate or $24 at Monday’s parallel rate) a month. With a monthly currency conversion cap set at $200, which is accompanied by a slew of taxes, most people turn to the black market to convert their pesos.
Saravia, with Barrios de Pie, says organisations such as hers are seeing an increase in the number of people relying on soup kitchens, in particular among pensioners. She believes there is more the government can do to punish big companies that speculate with price hikes. However, the message transmitted by the economy minister did not allay her concerns. She said the spending cuts attached to the IMF deal will hurt the lowest income sectors of society the most.
“More than half of the children in this country are under the line of poverty. The situation is very critical,” said Saravia. “We don’t think declaring default would have led to a situation that is much worse than the one we’re living in now.”